Cost of employee share purchase plans reduced
From 6th April 2010, the official rate on employee beneficial loans will reduce from 4.75% to 4%. This change will provide taxable benefits on loans exceeding £5,000.
The 4% rate of interest will also be used when calculating the tax on the interest of a 'notional loan'.
This is of particular importance when looking at Deferred Share Purchase Plan (DSPP) arrangements as a participant only pays a small amount of the purchase price, the rest being described as a notional loan from the employer. Therefore, from April this year, these participants will have a reduced tax liability.
It is important to also remember that for participants who are members of the core management team (i.e. have a 5% or more interest in the company) do not have to pay any tax on the notional loan.
For more information about DSPPs and tax liability, call an advisor on 020 8949 5522.